On Thursday, Rick Osterloh, Senior Vice-President of Devices and Services at Google, announced that the tech giant had completed its $US2.1B acquisition of fitness technology company Fitbit. This follows the transaction receiving regulatory approval by the Federal Trade Commission (FTC) and European Commission.
However, the Australian Competition and Consumer Commission (ACCC) has yet to provide a ruling on the merger and most recently rejected a proposed behavioural undertaking offered by Google late last year.
Immediate concerns for the ACCC
The deal was first announced in November 2019 and the ACCC quickly responded by initiating a merger review process. Chief amongst the regulator’s concerns, outlined in its statement of issues, was that health user data collected by Fitbit would enable Google to broaden its already comprehensive set of consumer data and further entrench its position as the leader in online advertising services.
The ACCC was also concerned that, upon entry into wearables manufacturing, Google would restrict competitors’ access to Wear OS, Google Maps and the Google Play Store – important Google API services that enable third-party wearable devices to work most effectively. Further, the regulator also noted that Google may be incentivised to restrict interoperability between other wearables and Google’s Android smartphone operating system.
Google sought to appease the ACCC’s initial concerns by offering a long-term, court-enforceable behavioural undertaking. The tech giant proposed that it would not use certain user data collected through its wearable devices for advertising purposes for 10 years following the acquisition. Over the same timeframe, Google would also be required to provide third parties with access to certain data collected on their wearable devices, and also maintain interoperability between third-party wearables and Android smartphones.
However, after a three-week market consultation period, the regulator announced it would reject the proposal. Whilst an undertaking offered in similar terms was accepted by the European Commission, ACCC Chair Rod Sims indicated that the regulator was not satisfied that the undertaking “could be effectively monitored and enforced in Australia”.
Indeed, behavioural undertakings are not commonplace in Australia, and the ACCC has traditionally not favoured them given they require the regulator’s continual monitoring and may also inadvertently interfere with ongoing competitive processes (by being inflexible and unresponsive to market changes).
Past track record offers little reassurance
Here, even aside these concerns, the competition watchdog had good reason to view Google’s undertaking with skepticism. Despite both Google and Fitbit’s continued reassurances to consumers and regulators that the “deal has always been about devices, not data” and that Fitbit’s wearables data would remain segregated from Google ads data, the tech giant has a history of reneging such promises.
Similarly, in 2014, when buying smart-home technology company Nest, Nest co-founder chief product officer Matt Rogers posted in a blog that “Nest data will stay with Nest”. The post alluded to the company’s terms of service at the time which meant Nest user data could only be shared across its own products and services range, and accordingly would not be available to Google. Unsurprisingly, within six months of the merger, it was announced that Google would be connecting some of its apps to Nest’s systems and thus integrating Nest’s user data.
Despite pushing ahead with the deal in the face of the ACCC’s rejection, Google insists that it remains willing to continue engaging with the regulator throughout its investigation.
However, since the acquisition has been completed, the merger review investigation has been closed and the matter is now being treated as an enforcement investigation. This has the potential to lead to legal action if deemed appropriate.
If no subsequent action is taken by the ACCC, it will be interesting to see just how closely Google complies with its proposed, albeit rejected, behavioural undertaking.